Yahoo 2013 Annual Report Download - page 28

If we are unable to attract, sustain, and renew distribution arrangements on favorable terms, our revenue may
decline.
We enter into distribution arrangements with third parties such as operators of third-party Websites, online
networks, software companies, electronics companies, computer manufacturers, Internet service providers and
others to promote or supply our services to their users. For example:
• We maintain search and display advertising relationships with Affiliate sites, which integrate our advertising
offerings into their Websites.
• We enter into distribution alliances with Internet service providers (including providers of cable and
broadband Internet access) and software distributors to promote our services to their users.
• We enter into agreements with mobile phone, tablet, television, and other device manufacturers, electronics
companies and carriers to promote our software and services on their devices.
In some markets, we depend on a limited number of distribution arrangements for a significant percentage of our
user activity. A failure by our distributors to attract or retain their user bases would negatively impact our user
activity and, in turn, reduce our revenue. In some cases, device manufacturers may be unwilling to pay fees to
Yahoo in order to distribute Yahoo services or may be unwilling to distribute Yahoo services.
In the future, as new methods for accessing the Internet and our services become available, including through
alternative devices, we may need to enter into amended distribution agreements with existing access providers,
distributors, and manufacturers to cover the new devices and new arrangements. We face a risk that existing and
potential new access providers, distributors, and manufacturers may decide not to offer distribution of our
services on reasonable terms, or at all.
Distribution agreements often involve revenue sharing. Over time competition to enter into distribution
arrangements may cause our traffic acquisition costs to increase. In some cases, we guarantee distributors a
minimum level of revenue and, as a result, run a risk that the distributors’ performance (in terms of ad
impressions, toolbar installations, etc.) might not be sufficient to otherwise earn their minimum payments. In
other cases, we agree that if the distributor does not realize specified minimum revenue we will adjust the
distributor’s revenue-share percentage or provide make-whole arrangements.
Some of our distribution agreements are not exclusive, have a short term, are terminable at will, or are subject to
early termination provisions. The loss of distributors, increased distribution costs, or the renewal of distribution
agreements on significantly less favorable terms may cause our revenue to decline.
Technologies, tools, software, and applications could block our advertisements, impair our ability to deliver
interest-based advertising, or shift the location in which advertising appears, which could harm our operating
results.
Technologies, tools, software, and applications (including new and enhanced Web browsers) have been
developed and are likely to continue to be developed that can block or allow users to opt out of display, search,
and interest-based advertising and content, delete or block the cookies used to deliver such advertising, or shift
the location in which advertising appears on pages so that our advertisements do not show up in the most
monetizable places on our pages or are obscured. Most of our revenue is derived from fees paid by advertisers in
connection with the display of graphical and non-graphical advertisements or clicks on search advertisements on
Web pages. As a result, the adoption of such technologies, tools, software, and applications could reduce the
number of display and search advertisements that we are able to deliver and/or our ability to deliver interest-
based advertising and this, in turn, could reduce our advertising revenue and operating results.
26